Yesterday, the FCC issued a $2.25 million Forfeiture Order against TV Max Inc. (and its affiliates and subsidiaries) for “willfully and repeatedly” violating Section 325 of the Communications Act. The fine reflects the amount proposed in the FCC’s June 2013 Notice of Apparent Liability. In a post-Aereo world, the FCC seems to be taking retransmission violations more seriously than ever. In addition, following a trend in recent large enforcement orders, the FCC took the position that each day TV Max acted in contravention of Section 325 constituted a separate violation of the Commission’s rules. This approach allowed the Commission to conclude that the statutory maximum exposure exceeded $16 million, thereby clearing room for the Commission’s $2.25 million fine. The Commission’s discussion also provides some interesting insights into its view of permissible rebroadcasts absent retransmission consent agreements.
Section 325 requires cable operators to obtain “retransmission consent” when a multichannel video programming distributor (“MVPD”) (such as a cable operator) wants to rebroadcast the signal of an over-the-air station to the MVPD’s paid subscribers. After failed renewal negotiations, TV Max, a Houston-area cable operator, was retransmitting the signals of six full-power commercial television broadcast stations, without the consent of the originating stations. TV Max also failed to pay those stations any fees associated with retransmitting their signals. Beginning in April 2012, the station licensees and parent companies, which included Fox, Univision, Post-Newsweek and ABC, filed complaints with the FCC on behalf of their Texas-area stations.
Previously, TV Max entered into consent agreements with the six full-power commercial stations, allowing TV Max to rebroadcast the station’s content, for a negotiated fee. However, TV Max was unable to renew those contracts on acceptable terms, and thereafter the cable operator continued to retransmit broadcast signals to its 10,000 Houston-area subscribers. TV Max claimed that although it was rebroadcasting the signals of these high-power stations, it wasn’t violating Section 325 because it qualified for the “master antenna television” exception.
Under that exception, owners of multi-unit complexes (like apartments or condo buildings) can use one master antenna to capture over-the-air broadcast signals, and send those signals to each unit of the complex. The owners of these complexes are not required to obtain consent from the stations but, per the exception, the broadcast signals must actually be retransmitted via the master antenna; occupants in the apartment complex or condos cannot be charged for viewing the stations; and the master antenna facilities and equipment must be owned and controlled by either the building owner or the occupants in the building (not a cable operator). Although TV Max claimed that it qualified for this exception, it actually didn’t meet any of the necessary criteria. Though master antennas may have been installed in several Houston-area complexes, they were not available to all of TV Max’s customers, meaning TV Max was still rebroadcasting content (illegally) over its own cables via its “fiber ring.” To make matters worse, publicly available documents showed that the antennas were not wholly owned and operated by the multi-unit owners, but were actually controlled by entities that owned TV Max.
In its forfeiture order, the FCC took a firm stance with TV Max. Though the Commission noted that TV Max’s violations were “particularly flagrant” and that various “aggregating factors” would permit it to increase the fine, the Commission decided to reaffirm the $2.25 million fine in the previous NAL. Regardless, the forfeiture order shows how seriously the FCC takes retransmission consent violations and sends a strong signal to MVPDs about how they should be doing business.